Fox to Affils: Need Dough For D'oh!

Why This Matters

There'll be no sixth night of programming in the near future at UPN. At NBC, the issues are how to make money at multicasting and how best to promote Brian Williams's move to the NBC Nightly News anchor seat. Those were some of the nuggets that came out of the UPN and NBC network-affiliate board meetings at NATPE last week.

CBS and UPN executives told the UPN affiliate board of governors about holding off on another night of programming; affiliates didn't cry. Dave Hanna, chairman of the UPN affiliate board and president of Bell Broadcasting, the group owner that includes WUPV-TV Richmond, Va., said, "They're going to do it when they're ready and have the right programming, and that's good news. It's clear it's going to happen" at some point.

The network needs the additional night to help move it into profitability. Hanna said he is highly confident, given remarks by CBS Television CEO Leslie Moonves, that CBS is committed to putting the resources into UPN that will move that network into the black.

NBC and members of its affiliate board spent a large part of a closed-door meeting on a NATPE Sunday afternoon pondering just how viable a business they would have jointly producing TV channels for their digital spectrum if cable systems aren't required to carry them. The answer is unclear although, for now, the feeling is that cable carriage isn't necessarily a must to make such channels to work.

The network and its affiliates confirmed a couple of months ago their plans to develop a weather/news alert channel that they hope to launch at midyear. Having a plan is one thing. But, said Roger Ogden, NBC affiliate board chairman and senior vice president for Gannett Broadcasting, "the tougher part is how do you get this done and how do you get it done against the backdrop of not knowing what the distribution is going to be from a cable perspective."

Ogden and NBC Television Network Group President Randy Falco briefed reporters on the meeting. Falco said he thinks the network and affiliates can persuade cable operators of the value of carrying broadcast digital channels even if the law doesn't require it. "I think ultimately that will be the case," he said. But, he added, "it may just be a good business anyway" with or without cable must-carry.

NBC told its affils that Brian Williams will be barnstorming the nation in coming months, as he prepares to replace Tom Brokaw as anchor of NBC Nightly News. Brokaw will step down in late November after the elections. The network told affiliates it's devising a promotion strategy that will include numerous activities in local markets. —S.M.

News Corp. President and COO Peter Chernin put Fox affiliates on notice at NATPE: Get ready to help the network pay to produce entertainment fare, not just sports.

It's not just cash that Fox is looking for, although it sure will be nice to have affiliates help pay for 24 or The Simpsons. The network seeks a broader value shift that would also take the form of collapsed exclusivity windows and new revenue opportunities, such as video-on-demand services.

Over time, such changes in the business model, as Chernin put it, may translate to hundreds of millions of dollars of wealth transfer to the network, at least if Fox gets its way.

Chernin was vague about to what extent affiliates would have to help pay the freight for entertainment fare. "But he stressed that the business model absolutely has to and will change," said one source who was at the meeting.

It remains to be seen what kind of additional payments the Fox stations can financially afford and would be willing to fork over. John Tupper, the immediate past chairman of the Fox affiliates board of governors, characterized Fox's stand as "a real problem. It's like trying to get blood from a stone."

Ron Crowder, newly elected board chairman and general manager of KWKT(TV) Waco, Texas, said demand for additional programming payments is a definite concern to stations. "Anytime you affect the profit-and-loss statements of the affiliates, it's a little disconcerting."

More philosophically, another station executive at the meeting said, "It's better to know what's coming than not to know."

Station group executives affiliated with other networks say they also expect to be asked to pony up more dollars to help finance big sports and entertainment programming. What they insist on, however, is that they have a chance to say no before the network commits to a big program-rights payment.

"I am sure there will be times when funding is asked for," said the head of a top-25 group. "But I also think it is only fair not to ask for funding after a deal has been made. That's the big issue."

Indeed, part of the reason NBC walked away from a renewal for the National Basketball Association rights contract two years ago was that the network knew it wouldn't get financial support from affiliates. And it knew because it asked before hand.

"When we heard the numbers that NBC thought it would take to get the deal and what they would want from the affiliates," said one source familiar with the situation, "we agreed we should pass."

Chernin's comments came at the Fox affiliate meeting in Las Vegas last week on the eve of the annual NATPE conference.

Commenting on the meeting, Fox Network Group President Tony Vinciquerra insisted that affiliates would not be writing checks for hundreds of millions of dollars. "What Peter said was that the model is changing and that stations will continue to have to participate in paying for entertainment and sports programming."

But the ante gets upped going forward, he added, and a major shift in value has to occur in the network's favor because Fox will no longer tolerate huge losses like the $900 million it has taken on its current NFL and Major League Baseball rights agreements.

Will cash payments increase? "Could be, but that's not the sole intention," said Vinciquerra. "The intention of the [Chernin] speech was to suggest there are different ways to do business and we need to find them."

Currently, affiliates contribute about $50 million a year in cash and inventory to help the network pay for the NFL. At its closed-door affiliate session in Las Vegas Jan. 17, Fox Sports Chairman David Hill told stations Fox will "do what it takes," as one affiliate source put it afterward, to renew the NFL deal, which has another two seasons to run under the current contract. That will likely mean a hefty increase in the rights fee, already somewhere around $500 million a year.

At the meeting, he tried to make the case that sports is too important a franchise for Fox to abandon. Five of the top 10 shows this season will be baseball and football playoff games seen on Fox, he told affiliates. (According to Hill, if Fox Sports were a separate network it would be the third-highest-rated network overall.)

But stations have to be prepared to shoulder more of the deficit associated with rights fees or make other compromises that effectively relieve the network of shouldering the burden to the extent it does today.

In private conversations with some affiliates after the meeting, "Peter Chernin made it clear the company will not let that happen again," said one affiliate source, referring to the huge losses from the sports-rights contracts.

Sources at the meeting said Fox made it clear that stations will be getting a bill for MLB and NASCAR rights, although the timetable has not been spelled out.